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Many German companies defied expectations and managed to stay afloat even as the COVID-19 pandemic wreaked havoc. However, it may be too early to rejoice as the bankruptcy numbers do not tell the whole story.
The number of corporate insolvencies in Germany fell last year to its lowest level since 1999, data from the Federal Statistics Office showed.
German district courts reported 15,841 corporate insolvencies in 2020, about 15% fewer than the year before.
The drop does not paint a true picture of the economic pain unleashed on the economy by the coronavirus owing to the German government’s decision to allow pandemic-damaged businesses to delay filing for bankruptcy during the crisis.
“It’s a paradox: Despite one of the biggest economic crises in Germany last year, insolvencies fell by 15%,” said Ron van het Hof, CEO of credit insurer Euler Hermes in Germany, Austria and Switzerland. “This shows how strongly the insolvency trend is decoupled from the actual overall economic condition and the current state of the companies.”
The German economy shrank by 5% last year, witnessing one of its worst recessions on record as COVID-19 lockdowns brought the economy to a virtual halt. The country still fared better than its European peers, helped by massive financial support from the government and strong demand for its goods from China.
The multibillion aid packages have offered major respite to firms that saw their sales plunge. The support has come in the form of tax breaks, wage subsidies, reduced VAT and even stake purchases in companies such as flag carrier Lufthansa — measures that have managed to keep many firms afloat.
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